Australia's inflation slowdown sparks fears of a fourth rate rise this year
July price data showed a smaller drop in inflation than expected, prompting concerns that the Reserve Bank may need to implement a fourth interest-rate increase before year-end.
July’s consumer-price index in Australia came in at 3.5% annual growth, a modest improvement from 3.8% but still above the 3.3% economists had predicted. The core measure, which strips out volatile items, remained stuck at 3.6%, defying expectations of moderation. KPMG chief economist Brendan Rynne warned that without policy action inflation could linger, and suggested the Reserve Bank missed a chance to pre-empt price pressures at its last meeting.
Board minutes showed members were unconvinced they could hit the 2.5% target by the end of next year, leaving a fourth rate rise this year on the table. NAB analysts said their earlier stance of no further hikes is now under review, while Deutsche Bank’s Phil O’Donaghoe expects a move as early as September. Rising fuel costs, higher construction expenses and increased restaurant prices added to the inflationary mix, keeping housing affordability a chronic concern.
Why it matters
Higher rates could increase mortgage costs for millions of Australians and affect the broader economy.
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